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Which Way Feedstocks?

Take heart or take heed. Depending on whom you believe, oil prices will continue to ease or shoot up faster than a gushing wildcat well. Two opposing views on oil—which is the foundation for so many products in the household and personal products industry—were put forth within a couple of days of each other last month. Fariborz Ghadar, director of the Center for Global Business Studies at Penn State University, predicted that oil prices will rise to $100 a barrel during the next five years and he warned that such a surge would put a major crimp in the global competitiveness for many industries.

Yet, earlier that same week, Daniel Lippe, Petral Consulting Group, told members of the Drug, Chemical and Associated Technologies Association (DCAT) that the expected growth in crude oil production has the potential to push prices back to levels seen in the 1980s and 1990s.

History appears to be on Mr. Lippe’s side. After all, oil prices have fluctuated wildly—700%—over the past two decades. Still, adjusted for inflation, the price of oil is still a bargain compared to many other product categories.

Mr. Lippe noted that the last time crude oil prices increased by a factor of three within a few years (1976-1980), it spurred a surge in worldwide crude oil exploration and development. And that’s just what’s happening today. According to Petral’s estimates, global production has the potential to increase 15-18 million barrels per day through 2010. That’s good news for many companies in the household and personal products industry, which depend so much on oil for their feedstocks.